Huge discounts bring sales
Adidas increases sales thanks to “Yeezy” sale
8/3/2023 4:21 p.m
Adidas can significantly increase its sales in the first half of 2023. The reason is high discounts on the “Yeezy” product line, an expired cooperation with scandal rapper Kanye West. According to CEO Gulden, however, the figures for 2024 and 2025 are much more important for the group.
Adidas’ exit from scandal rapper Kanye West’s “Yeezy” line has had a significant impact on the restructuring of its core business. A good fifth of the shoes that have already been produced and have been in stock since the sales stop in autumn were sold by Adidas in a first campaign at the end of May for 400 million euros, and with that alone they made an operating profit of 150 million, according to the sporting goods group’s half-year report. In May, Gulden decided to sell the remaining stock and donate part of the proceeds.
Above all, the most expensive “Yeezy” models ripped the customers out of Adidas’ hands. Another discount campaign, which is to extend throughout August, has just started. “We have to manage that very carefully,” warns the CEO. Adidas wants to donate a total of 110 million euros from the proceeds to organizations fighting racism and anti-Semitism. Ten million of these have already been paid out. Gulden’s predecessor, Kasper Rorsted, stopped selling the “Yeezy” shoes in the fall and ended the collaboration after West – who now calls himself Ye – made headlines with verbal abuse and anti-Semitic statements.
Sales and profit forecasts raised
The decision not to destroy the remainder was made under guilders. “It’s a lot better than destroying and writing off the inventory,” he comments. It is also a worthwhile step from a financial point of view: the sales campaign improved the gross margin by two percentage points to 50.9 percent in the second quarter alone.
Adidas had already raised the sales and profit forecasts for the current year in July: instead of a loss of 700 million euros, only a minus of 450 million is expected due to the “Yeezy” sales success.
Sales are expected to shrink by only around five percent in 2023. With further “Yeezy” actions, the balance sheet could continue to improve. But the result this year is not important, Gulden makes clear. Rather, it is important “to lay the foundation for a better year 2024 and a good and profitable company Adidas in the years 2025 and 2026”.
Major construction site US market
One of the company’s major construction sites is the US market, which is dominated by arch-rival Nike and on which Adidas’ “Yeezy” has been lost as its most important driving force. From April to June, sales in North America collapsed by 16 percent. Without the “Yeezy” campaign, it would have shrunk by a fifth.
In the USA, all sporting goods manufacturers are fighting with discounts against the full stocks that they had filled in the Corona pandemic when the goods were scarce. Now the accumulated stock is difficult to sell due to the current reluctance to buy. “Everyone has bought too much. In the shops you can still see a lot of red price tags,” said Gulden. Global inventories have fallen by 400 million to 5.5 billion euros since the beginning of the year. “The inventory no longer worries me,” says CFO Harm Ohlmeyer.
pent-up demand in basketball
However, Gulden also sees strategic deficits in the most important sports market in the world. “We’re not as successful in basketball as we’d like to be,” he says. As Puma boss at the time, he got into the business of the popular ball sport. However, Adidas is on the right track in the USA: “We have everything we need to turn the tide. But it takes some time from saying to doing.”
In China, too, where western brands have long been boycotted by consumers and celebrities, he sees light at the end of the tunnel: for the first time in three years, top stars there are ready to work with Adidas again. Sales there increased by 16 percent in the second quarter.